Republic of the Philippines And finally the case is hereby ordered dismissed with costs against the
SUPREME COURT plaintiff.
Manila
SECOND DIVISION
G.R. No. L-39086 June 15, 1988
ABRA VALLEY COLLEGE, INC., represented by PEDRO V.
BORGONIA, petitioner,
vs.
HON. JUAN P. AQUINO, Judge, Court of First Instance, Abra; ARMIN M.
CARIAGA, Provincial Treasurer, Abra; GASPAR V. BOSQUE, Municipal
Treasurer, Bangued, Abra; HEIRS OF PATERNO MILLARE, respondents.
PARAS, J.:
This is a petition for review on certiorari of the decision * of the defunct Court of
First Instance of Abra, Branch I, dated June 14, 1974, rendered in Civil Case No.
656, entitled "Abra Valley Junior College, Inc., represented by Pedro V. Borgonia,
plaintiff vs. Armin M. Cariaga as Provincial Treasurer of Abra, Gaspar V. Bosque
as Municipal Treasurer of Bangued, Abra and Paterno Millare, defendants," the
decretal portion of which reads:
IN VIEW OF ALL THE FOREGOING, the Court hereby declares:
That the distraint seizure and sale by the Municipal Treasurer of
Bangued, Abra, the Provincial Treasurer of said province against the lot
and building of the Abra Valley Junior College, Inc., represented by
Director Pedro Borgonia located at Bangued, Abra, is valid;
That since the school is not exempt from paying taxes, it should
therefore pay all back taxes in the amount of P5,140.31 and back taxes
and penalties from the promulgation of this decision;
That the amount deposited by the plaintaff him the sum of P60,000.00
before the trial, be confiscated to apply for the payment of the back
taxes and for the redemption of the property in question, if the amount
is less than P6,000.00, the remainder must be returned to the Director
of Pedro Borgonia, who represents the plaintiff herein;
That the deposit of the Municipal Treasurer in the amount of P6,000.00
also before the trial must be returned to said Municipal Treasurer of
Bangued, Abra;
SO ORDERED. (Rollo, pp. 22-23)
Petitioner, an educational corporation and institution of higher learning duly
incorporated with the Securities and Exchange Commission in 1948, filed a
complaint (Annex "1" of Answer by the respondents Heirs of Paterno Millare;
Rollo, pp. 95-97) on July 10, 1972 in the court a quo to annul and declare void
the "Notice of Seizure' and the "Notice of Sale" of its lot and building located at
Bangued, Abra, for non-payment of real estate taxes and penalties amounting to
P5,140.31. Said "Notice of Seizure" of the college lot and building covered by
Original Certificate of Title No. Q-83 duly registered in the name of petitioner,
plaintiff below, on July 6, 1972, by respondents Municipal Treasurer and
Provincial Treasurer, defendants below, was issued for the satisfaction of the
said taxes thereon. The "Notice of Sale" was caused to be served upon the
petitioner by the respondent treasurers on July 8, 1972 for the sale at public
auction of said college lot and building, which sale was held on the same date.
Dr. Paterno Millare, then Municipal Mayor of Bangued, Abra, offered the highest
bid of P6,000.00 which was duly accepted. The certificate of sale was
correspondingly issued to him.
On August 10, 1972, the respondent Paterno Millare (now deceased) filed
through counstel a motion to dismiss the complaint.
On August 23, 1972, the respondent Provincial Treasurer and Municipal
Treasurer, through then Provincial Fiscal Loreto C. Roldan, filed their answer
(Annex "2" of Answer by the respondents Heirs of Patemo Millare; Rollo, pp. 98-
100) to the complaint. This was followed by an amended answer (Annex
"3," ibid, Rollo, pp. 101-103) on August 31, 1972.
On September 1, 1972 the respondent Paterno Millare filed his answer (Annex
"5," ibid; Rollo, pp. 106-108).
On October 12, 1972, with the aforesaid sale of the school premises at public
auction, the respondent Judge, Hon. Juan P. Aquino of the Court of First Instance
of Abra, Branch I, ordered (Annex "6," ibid; Rollo, pp. 109-110) the respondents
provincial and municipal treasurers to deliver to the Clerk of Court the proceeds
of the auction sale. Hence, on December 14, 1972, petitioner, through Director
Borgonia, deposited with the trial court the sum of P6,000.00 evidenced by PNB
Check No. 904369.
On April 12, 1973, the parties entered into a stipulation of facts adopted and
embodied by the trial court in its questioned decision. Said Stipulations reads:
 STIPULATION OF FACTS
COME NOW the parties, assisted by counsels, and to this Honorable
Court respectfully enter into the following agreed stipulation of facts:
1. That the personal circumstances of the parties as stated in paragraph
1 of the complaint is admitted; but the particular person of Mr. Armin
M. Cariaga is to be substituted, however, by anyone who is actually
holding the position of Provincial Treasurer of the Province of Abra;
2. That the plaintiff Abra Valley Junior College, Inc. is the owner of the
lot and buildings thereon located in Bangued, Abra under Original
Certificate of Title No. 0-83;
3. That the defendant Gaspar V. Bosque, as Municipal treasurer of
Bangued, Abra caused to be served upon the Abra Valley Junior College,
Inc. a Notice of Seizure on the property of said school under Original
Certificate of Title No. 0-83 for the satisfaction of real property taxes
thereon, amounting to P5,140.31; the Notice of Seizure being the one
attached to the complaint as Exhibit A;
4. That on June 8, 1972 the above properties of the Abra Valley Junior
College, Inc. was sold at public auction for the satisfaction of the unpaid
real property taxes thereon and the same was sold to defendant
Paterno Millare who offered the highest bid of P6,000.00 and a
Certificate of Sale in his favor was issued by the defendant Municipal
Treasurer.
5. That all other matters not particularly and specially covered by this
stipulation of facts will be the subject of evidence by the parties.
WHEREFORE, it is respectfully prayed of the Honorable Court to
consider and admit this stipulation of facts on the point agreed upon by
the parties.
Bangued, Abra, April 12, 1973.
Aside from the Stipulation of Facts, the trial court among others, found the
following: (a) that the school is recognized by the government and is offering
Primary, High School and College Courses, and has a school population of more
than one thousand students all in all; (b) that it is located right in the heart of
the town of Bangued, a few meters from the plaza and about 120 meters from
the Court of First Instance building; (c) that the elementary pupils are housed in
a two-storey building across the street; (d) that the high school and college
students are housed in the main building; (e) that the Director with his family is
in the second floor of the main building; and (f) that the annual gross income of
the school reaches more than one hundred thousand pesos.
From all the foregoing, the only issue left for the Court to determine and as
agreed by the parties, is whether or not the lot and building in question are used
exclusively for educational purposes. (Rollo, p. 20)
The succeeding Provincial Fiscal, Hon. Jose A. Solomon and his Assistant, Hon.
Eustaquio Z. Montero, filed a Memorandum for the Government on March 25,
1974, and a Supplemental Memorandum on May 7, 1974, wherein they opined
"that based on the evidence, the laws applicable, court decisions and
jurisprudence, the school building and school lot used for educational purposes
of the Abra Valley College, Inc., are exempted from the payment of taxes."
(Annexes "B," "B-1" of Petition; Rollo, pp. 24-49; 44 and 49).
Nonetheless, the trial court disagreed because of the use of the second floor by
the Director of petitioner school for residential purposes. He thus ruled for the
government and rendered the assailed decision.
After having been granted by the trial court ten (10) days from August 6, 1974
within which to perfect its appeal (Per Order dated August 6, 1974; Annex "G"
of Petition; Rollo, p. 57) petitioner instead availed of the instant petition for
review on certiorari with prayer for preliminary injunction before this Court,
which petition was filed on August 17, 1974 (Rollo, p.2).
In the resolution dated August 16, 1974, this Court resolved to give DUE
COURSE to the petition (Rollo, p. 58). Respondents were required to answer
said petition (Rollo, p. 74).
Petitioner raised the following assignments of error:
I
THE COURT A QUO ERRED IN SUSTAINING AS VALID THE SEIZURE AND SALE
OF THE COLLEGE LOT AND BUILDING USED FOR EDUCATIONAL PURPOSES OF
THE PETITIONER.
II
THE COURT A QUO ERRED IN DECLARING THAT THE COLLEGE LOT AND
BUILDING OF THE PETITIONER ARE NOT USED EXCLUSIVELY FOR
EDUCATIONAL PURPOSES MERELY BECAUSE THE COLLEGE PRESIDENT
RESIDES IN ONE ROOM OF THE COLLEGE BUILDING.
III
THE COURT A QUO ERRED IN DECLARING THAT THE COLLEGE LOT AND
BUILDING OF THE PETITIONER ARE NOT EXEMPT FROM PROPERTY TAXES
AND IN ORDERING PETITIONER TO PAY P5,140.31 AS REALTY TAXES.
IV
THE COURT A QUO ERRED IN ORDERING THE CONFISCATION OF THE
P6,000.00 DEPOSIT MADE IN THE COURT BY PETITIONER AS PAYMENT OF
THE P5,140.31 REALTY TAXES. (See Brief for the Petitioner, pp. 1-2)
The main issue in this case is the proper interpretation of the phrase "used
exclusively for educational purposes."
Petitioner contends that the primary use of the lot and building for educational
purposes, and not the incidental use thereof, determines and exemption from
property taxes under Section 22 (3), Article VI of the 1935 Constitution. Hence,
the seizure and sale of subject college lot and building, which are contrary
thereto as well as to the provision of Commonwealth Act No. 470, otherwise
known as the Assessment Law, are without legal basis and therefore void.
On the other hand, private respondents maintain that the college lot and
building in question which were subjected to seizure and sale to answer for the
unpaid tax are used: (1) for the educational purposes of the college; (2) as the
permanent residence of the President and Director thereof, Mr. Pedro V.
Borgonia, and his family including the in-laws and grandchildren; and (3) for
commercial purposes because the ground floor of the college building is being
used and rented by a commercial establishment, the Northern Marketing
Corporation (See photograph attached as Annex "8" (Comment; Rollo, p. 90]).
Due to its time frame, the constitutional provision which finds application in the
case at bar is Section 22, paragraph 3, Article VI, of the then 1935 Philippine
Constitution, which expressly grants exemption from realty taxes for
"Cemeteries, churches and parsonages or convents appurtenant thereto, and all
lands, buildings, and improvements used exclusively for religious, charitable or
educational purposes ...
Relative thereto, Section 54, paragraph c, Commonwealth Act No. 470 as
amended by Republic Act No. 409, otherwise known as the Assessment Law,
provides:
The following are exempted from real property tax under the
Assessment Law:
xxx xxx xxx
(c) churches and parsonages or convents appurtenant thereto, and all
lands, buildings, and improvements used exclusively for religious,
charitable, scientific or educational purposes.
xxx xxx xxx
In this regard petitioner argues that the primary use of the school lot and
building is the basic and controlling guide, norm and standard to determine tax
exemption, and not the mere incidental use thereof.
As early as 1916 in YMCA of Manila vs. Collector of lnternal Revenue, 33 Phil. 217
[1916], this Court ruled that while it may be true that the YMCA keeps a lodging
and a boarding house and maintains a restaurant for its members, still these do
not constitute business in the ordinary acceptance of the word, but an
institution used exclusively for religious, charitable and educational purposes,
and as such, it is entitled to be exempted from taxation.
In the case of Bishop of Nueva Segovia v. Provincial Board of Ilocos Norte, 51 Phil.
352 [1972], this Court included in the exemption a vegetable garden in an
adjacent lot and another lot formerly used as a cemetery. It was clarified that
the term "used exclusively" considers incidental use also. Thus, the exemption
from payment of land tax in favor of the convent includes, not only the land
actually occupied by the building but also the adjacent garden devoted to the
incidental use of the parish priest. The lot which is not used for commercial
purposes but serves solely as a sort of lodging place, also qualifies for
exemption because this constitutes incidental use in religious functions.
The phrase "exclusively used for educational purposes" was further clarified by
this Court in the cases of Herrera vs. Quezon City Board of assessment Appeals, 3
SCRA 186 [1961] and Commissioner of Internal Revenue vs. Bishop of the
Missionary District, 14 SCRA 991 [1965], thus —
Moreover, the exemption in favor of property used exclusively for
charitable or educational purposes is 'not limited to property actually
indispensable' therefor (Cooley on Taxation, Vol. 2, p. 1430), but
extends to facilities which are incidental to and reasonably necessary
for the accomplishment of said purposes, such as in the case of
hospitals, "a school for training nurses, a nurses' home, property use to
provide housing facilities for interns, resident doctors, superintendents,
and other members of the hospital staff, and recreational facilities for
student nurses, interns, and residents' (84 CJS 6621), such as "Athletic
 fields" including "a firm used for the inmates of the institution. (Cooley for commercial purposes. However, since only a portion is used for purposes of
on Taxation, Vol. 2, p. 1430). commerce, it is only fair that half of the assessed tax be returned to the school
involved.
The test of exemption from taxation is the use of the property for purposes
mentioned in the Constitution (Apostolic Prefect v. City Treasurer of Baguio, 71 PREMISES CONSIDERED, the decision of the Court of First Instance of Abra,
Phil, 547 [1941]). Branch I, is hereby AFFIRMED subject to the modification that half of the
assessed tax be returned to the petitioner.
It must be stressed however, that while this Court allows a more liberal and
non-restrictive interpretation of the phrase "exclusively used for educational SO ORDERED.
purposes" as provided for in Article VI, Section 22, paragraph 3 of the 1935
Philippine Constitution, reasonable emphasis has always been made that Yap, C.J., Melencio-Herrera, Padilla and Sarmiento, JJ., concur.
exemption extends to facilities which are incidental to and reasonably
necessary for the accomplishment of the main purposes. Otherwise stated, the Footnotes
use of the school building or lot for commercial purposes is neither
contemplated by law, nor by jurisprudence. Thus, while the use of the second
floor of the main building in the case at bar for residential purposes of the * Penned by the respondent Judge, Hon. Judge P. Aquino.
Director and his family, may find justification under the concept of incidental
use, which is complimentary to the main or primary purpose—educational, the
lease of the first floor thereof to the Northern Marketing Corporation cannot by
any stretch of the imagination be considered incidental to the purpose of
education.

It will be noted however that the aforementioned lease appears to have been
raised for the first time in this Court. That the matter was not taken up in the to
court is really apparent in the decision of respondent Judge. No mention thereof
was made in the stipulation of facts, not even in the description of the school
building by the trial judge, both embodied in the decision nor as one of the
issues to resolve in order to determine whether or not said properly may be
exempted from payment of real estate taxes (Rollo, pp. 17-23). On the other
hand, it is noteworthy that such fact was not disputed even after it was raised in
this Court.

Indeed, it is axiomatic that facts not raised in the lower court cannot be taken up
for the first time on appeal. Nonetheless, as an exception to the rule, this Court
has held that although a factual issue is not squarely raised below, still in the
interest of substantial justice, this Court is not prevented from considering a
pivotal factual matter. "The Supreme Court is clothed with ample authority to
review palpable errors not assigned as such if it finds that their consideration is
necessary in arriving at a just decision." (Perez vs. Court of Appeals, 127 SCRA
645 [1984]).

Under the 1935 Constitution, the trial court correctly arrived at the conclusion
that the school building as well as the lot where it is built, should be taxed, not
because the second floor of the same is being used by the Director and his
family for residential purposes, but because the first floor thereof is being used